NZ Dollar Outlook:Japanese and US policy the focus

Jan. 21 (BusinessDesk) - The
New Zealand dollar will struggle to exhibit a clear trend
this week with Japanese monetary policy and US budget policy
at the top of traders' minds.

The kiwi recently traded at
83.46 US cents from 83.64 cents at 5pm on Friday. It may
trade in a range of 81.80 cents to 84.70 cents this week,
according to a BusinessDesk survey of four traders and
strategists.

"I'm seeing that the uptrend since June last
year remains intact as long as 82.00 cents holds," Imre
Speizer, senior markets strategist at Westpac,
said."Momentum has slipped and the kiwi could test just
under 83.00 cents," he said, saying he was neutral on
direction this week.

Alex Sinton at ANZ is predicting an
upward bias for the kiwi this week but says direction is a
hard call.

"The Bank of Japan tomorrow is the fly in the
ointment," he said.

The Bank of Japan is expected to keep
to its plan of stimulating the Japanese economy, which has
made the yen weak.

All 23 economists in a Bloomberg News
survey expect the central bank to expand asset purchases at
a two-day meeting that starts today.

"Most of what they
unveil tomorrow will have been priced into the yen and if
anything we might get some yen buying once the news is out
with people taking profit on short-yen positions," Mr
Speizer said.

"Kiwi-yen is really extremely over-bought
technically and it's really screaming that it needs to
correct at least a few yen," he said.

In the US, the
Republican-controlled House of Representatives has signalled
that it intends to support a three-month extension of the US
debt ceiling.Bancorp Treasury Services says that this
would avert a government debt default in February or
March.

The looming US debt ceiling fight was not yet
upsetting markets, with US equities touching five-year
peaks.

Mr Speizer said a vote on this temporary debt
ceiling increase on Wednesday US time may prove to be the
most important event for the new Zealand market this
week.

"The extension would put off a fight between the
Republicans and Obama over a long term ceiling increase
until they have negotiated two other fiscal deadlines in the
next few months."

With a weaker-than-expected December-
uarter New Zealand consumers price index now behind the
market, the focus is turning to Australian December-quarter
inflation data on Wednesday.

The headline consumers price
index is expected to be softer because of weak food prices,
but the core rate will be little changed.

A rate cut is
expected to be discussed at the next Reserve Bank of
Australia board meeting in February and a low core CPI could
be a tipping
point.

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